Unease unfolded this week over the corn market as President Donald Trump and President Enrique Peña Nieto of Mexico—a major buyer of U.S. corn—sparred over the proposed construction of a border wall, says Jerry Gulke, president of the Gulke Group. At the same time, technical signals suggest corn could face downward price pressure in the weeks ahead.
The Mexican president’s decision to cancel a trip to the White House next week leaves some people in the agriculture community thinking Trump might get into a trade war.
“Did they do this in anticipation of saying, ‘I can pull back from buying anything from you guys for a little while, inflict a little pain on the exports, watch the price go down’?” Gulke asked during a Thursday interview with “Weekend Market Report” host Pam Fretwell from the 2017 Top Producer Seminar in Chicago. “Farmers [might] get nervous and go to Trump and say, ‘What are you doing?’ It’s this cat-and-mouse game that we think Trump can win all of those things, but the market is uncertain.”
Keep in mind American farmers have benefited from trade deals such as NAFTA, Gulke adds.
“We would have never sold that amount of corn to Mexico because part of the NAFTA agreement was they had to buy certain amounts of grain from us,” Gulke points out. “Now if you’re going to renegotiate that, [it] puts another element of concern in there.”
At the same time, U.S. producers have been selling soybeans and corn because prices are a lot higher than they were in December, Gulke says. Trade uncertainty, grain sales by producers and traders, and emerging technical retracements all are feeding a general sense of unease.
“We had some key reversals down at the resistance where we were trying to rise above the July highs. We also ironically, back in July, started the downward trend with a key reversal down,” Gulke says. “In other words, when you took out the previous day’s high and low and closed lower, that also was up against some key levels that we had to sustain this rally, and we couldn’t do it. It’s a little concerning. We [at Gulke Group] made some hedge coverage in anticipation of that, and in reaction to it, just to get some coverage based upon that and the political atmosphere that’s going on out there.”
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